Is Long-Term Care Insurance Tax Deductible?

A portion of long-term care insurance premiums is tax-deductible in certain circumstances. Most policies offer tax benefits, including no taxation on benefits and deductions for premiums, but some policies might not qualify. The premiums paid by the covered person qualify as unreimbursed medical expenses, which must exceed 7.5% of the adjusted gross income before they can be deducted. The IRS limits how much of the premiums can be deducted based on the person’s age. 

Long-term care insurance premiums vary in price based on the person’s age and health condition when they start the policy as well as the chosen coverage amounts. Having a policy can help offset the high costs of long-term care, but the premiums can be expensive and have to be paid whether or not the covered person needs long-term care. Tax deductions can help reduce the costs of having long-term care insurance to make it more affordable.

Premiums Are Tax-Deductible for Some People

To use long-term care insurance as a tax deduction, the policy owner has to itemize their tax deductions. People who take the standard deduction on their income taxes can’t take deductions for their medical expenses. They also must have unreimbursed medical expenses that are more than 7.5% of their adjusted gross income. Self-employed individuals don’t have to meet the 7.5% minimum to deduct medical expenses if they made a net profit. However, they’re still subject to the limits on how much of the premiums can be deducted.

Tax-Deductible Amount Is Limited

The IRS sets a yearly limit for the amount of the premiums that can be deducted. These limits are the total amount of yearly premiums that can be counted as medical expenses for tax deductions. If the premiums were more than the limit, the additional premium amount doesn’t qualify as a tax-deductible medical expense. The limit gets adjusted in some years and is based on the person’s age at the end of the tax year. The limits for the 2022 tax year are:

• 40 and under: $450
• 41 to 50: $850
• 51 to 60: $1,690
• 61 to 70: $4,520
• 71 and over: $5,640

Some states also offer tax incentives on long-term care insurance premiums. This might include tax deductions or credits on state income tax returns. 

Policies Must Be Qualified

For the premiums to be deductible, the long-term care policy must be a qualified plan. This means the policy follows the regulations of the National Association of Insurance Commissioners. Checking with the insurance company is the best way to find out if the policy qualifies for tax deductions.